A German court ruling on Wednesday paved the way for Europe to proceed with its bailout schemes, which saw European stocks touch a 14-month high and the MSCI global share index hit a five-month high later in the day, while safe-haven U.S. Treasuries and German bonds were sold.

Germany's Constitutional Court said the country can ratify the euro zone's new rescue fund and budget pact, as long it can guarantee there will be no increase in German financial exposure to the bailout fund without parliament's approval.

The Fed ends its two-day meeting on Thursday with the policy result expected to be released at 1630 GMT, followed by Chairman Ben Bernanke's news conference about two hours later.

"With key events in Europe behind us for the moment, all eyes now shift to the FOMC policy decision. We expect the Fed to extend its rate guidance into 2015 and launch an open-ended asset purchase program," said Barclays Capital in a note.

"We believe that the Treasury market is not yet adequately pricing in the Fed's resolve to ease monetary policy," it said.

With markets fully pricing in a further U.S. monetary easing, the dollar index measured against a basket of key currencies hovered near a four-month low.

"We expect the US dollar to emerge weaker both on the day and multi-day/week on delivery of QE. Westpac leans towards purchases of mortgage-backed securities, quite possibly 'unlimited' (reviewed meeting by meeting)," said Sean Callow, senior currency strategist at Westpac in Sydney.

Asian credit markets steadied, with the spread on the iTraxx Asia ex-Japan investment-grade index little changed and pinned at its tightest level since August last year.

Several Asian central banks will make interest rate decisions this session, including Indonesia and South Korea. The South Korean central bank is widely expected to cut rates for a second time this year to prop up Asia's fourth-biggest economy.

GERMANY REMOVES HURDLES

The euro steadied around $1.2901 after touching a four-month high against the dollar at $1.2937 on Wednesday. The single currency traded at 100.38 against the yen, off its highest in over two months at 100.64 yen hit the day before.

The German court ruling gave the euro zone more tools to manage its euro zone debt crisis, driving down borrowing costs in Spain and Italy.

The ruling comes as the European Central Bank decides to buy short-term bonds of states that apply for bailout and abide by strict conditions, and the European Union proposes a single euro zone banking supervisor, in a concerted effort to preserve the common currency bloc.

U.S. crude inched down 0.1 percent to $96.95 a barrel and Brent oil futures fell 0.3 percent to $116.50. Brent rose the previous session on the German court ruling and geopolitical concerns, but data showing a rise in U.S. crude stocks curbed gains.

Lipper data showed the world's largest exchange-traded fund for gold, SPDR Gold Shares, drew an inflow of nearly $2 billion in August, or four-fifths of all the money that went into some 230 U.S.-regulated commodity products and funds that Lipper tracks.

Expectations for a new U.S. monetary stimulus fuelled a rally in gold. Spot gold traded at $1,730.99 an ounce on Thursday, after climbing to 6-1/2 month highs of $1,746.20 on Wednesday.

Also in August, when hopes heightened for decisive action from the ECB to calm market jitters about contagion from the debt crisis, U.S. prime money market funds raised their holdings of euro zone bank debt, a report from J.P. Morgan Securities showed.